Last Year, Sarah (Who Files as Single) Had Silverware Worth

question 28

Multiple Choice

Last year, Sarah (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home. Sarah's insurance company told her that her policy did not cover the theft. Sarah's other itemized deductions last year were $10,000. She had AGI of $30,000 last year. In August of the current year, Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000. Determine the tax treatment of the $5,000 received by Sarah during the current year.

• A)None of the $5,000 should be included in gross income.
• B)$2,900 should be included in gross income.
• C)$5,000 should be included in gross income.
• D)Last year's return should be amended to include the $5,000.
• E)None of the above.

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Definitions:

Widowed Mother

A woman who has lost her spouse through death and is raising her children alone.

Developmental Stages

The distinct phases of growth and development an individual undergoes from infancy through adulthood, involving both physical and psychological changes.

Planning Goals

The process of identifying specific objectives to be achieved within a set period.

Vague

Lacking in clarity, specificity, or detail, often resulting in ambiguity or misunderstanding.